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Thursday, December 31, 2015

Questions about the relationship between slavery and capitalism in the United States have animated historians for nearly a century, and they have never really been resolved. Where some scholarshave argued that profit motives, entrepreneurialism and market relations defined American slavery, others have insisted just as emphatically that the slave society of the southern states lacked a truly free labour market and precluded the cultivation of bourgeois values and the development of large cities, which are distinguishing characteristics of capitalist society.

In the past several years, however, the former view has been clearly ascendant, with historians producing a steady stream of scholarship advancing the argument that slavery in the US was both itself deeply capitalistic and made profound contributions to the burgeoning industrial world whose guns, ships and bombs would eventually bring about slavery’s demise. Books by Edward Baptist, Sven Beckert and Walter Johnson have made the most noise. But their work, along with that of the historians Daina Ramey Berry, Seth Rockman, Caitlin Rosenthal, Calvin Schermerhorn and many others has effectively launched an entire subfield of literature dedicated to exploring the ways that human bondage gave rise to a modern Western superpower.

Unsurprisingly, it is an avenue of enquiry that has roiled academics and the public alike. For some, the definition of capitalism in recent works is too imprecise or insufficiently grounded in theories of political economy to take seriously. Some question whether the authors of these works have an understanding of economics deep and thorough enough to sustain their claims. Still others are underwhelmed by arguments they feel they have heard before and found less than convincing the first time. And for some people the very idea that slavery could be integral to capitalism is anathema, because to them capitalism is the foundation of freedom itself.

There is some irony in all this reactionary hodgepodge, because whether it comes from the left or the right, the hostility toward the new history of slavery and capitalism frequently seems rooted in disdain that is as much a matter of dogma as of analysis.

Throughout Karl Marx's long career as philosopher, his- torian, social critic, and revolutionary, he considered the enslavement of African people in America to be a fundamental aspect of rising capitalism, not only in the New World, but in Europe as well. As early as 1847, Marx made the following forceful observation:"Direct slavery is just as much the pivot of bourgeois industry as machinery, credits, etc. Without slavery you have no cotton; without cotton you have no modern industry. It is slavery that has given the colonies their value; it is the colonies that have created world trade, and it is world trade that is the pre-condition of large-scale industry. Thus slavery is an economic category of the greatest importance."Without slavery North America, the roost progressive of countries, would be transformed into a patriarchal country. Wipe out North America from the map of the world, and you will have anarchy — the complete decay of modern commerce and civilisation. Cause slavery to disappear and you will have wiped America off the map of nations."Thus slavery, because it is an economic category, has always existed among the institutions of the peoples. Modern nations have been able only to disguise slavery in their own countries, but they have imposed it without disguise upon the New World.1"

1. Karl Marx, The Poverty of Philosophy: A Reply to M. Proudhon’s Philosophy of Poverty, New York, International Publishers, n.d., pages 94-5.

There's a lot of academic MMT talk and discussion out there, we know that. But how about learning how to apply that knowledge, as in, making money with it?

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Wednesday, December 30, 2015

On December 23, 2015, the Democrat Presidential candidate Bernie Sanders published an Op Ed – Bernie Sanders: To Rein In Wall Street, Fix the Fed – which, correctly, in my view, concluded that Wall Street (taken to be the collective of banksters wherever they might be located) “is still out of control” and policy reform has done little to alter the “too big to fail” problem that was identified in the early days of the GFC as one bank after another lined up for government assistance. Larry Summers replied to the Op Ed in his blog – The Fed and Financial Reform – Reflections on Sen. Sanders op-Ed – challenging several of the proposals advanced by Sanders. The problem is that the progressive voice of Bernie Sanders labours under some basic misconceptions about how the monetary system operates and therefore plays into the hands of those who have created the mess. Conversely, Summers clearly understands basic elements of the monetary system but continues to advocate policies which avoid addressing the main issue – the power of the financial markets.…

The conception that Bernie Sanders creates is that the banks are being diverted by the US central bank from lending those reserves.

Bernie Sanders is just plain wrong here and is surprising that he has been allowed to maintain this misconception. If his persistence in maintaining incorrect ideas about how the banking system operates is his own doing (that is, ignoring sound advice from his team), then he is unfit to be President. Simple as that….

I like the way that Bernie Sanders is attempting to redefine the public policy debate and have sympathy for many of his positions and values.

But I don’t think it helps when progressive voices make simple mistakes that, ultimately, ply into the hands of those who have created the mess the world economy is now in.

Hamilton modeled the Bank of the United States after the Bank of England. But in truth, the monopoly privileges of the BOE and other national banks of Europe were badges of mercantilism, and drags on financial and economic activity by comparison with free competition in banking services. A more wholesome, solid, and beneficial credit system could be observed in Scotland at the time, with free entry into nationwide branch banking. Hamilton’s “masterpiece” was oblivious to the benefits of competition in banking, much less the separation of banking and state. In his banking policy views, as in his tariff policy views, Hamilton was a retrograde mercantilist.

Hamilton was absolutely a mercantilist. He recognized that the US was in competition with mercantilist England and that the nascent republic was in no position to experiment. Hamilton's plan was to emulate success.

Although Hamilton’s Report on the Bank alludes to Smith’s understanding of how banking promotes the wealth of a nation, Hamilton either didn’t understand Smith’s policy message — the more banks competing the better — or rejected it as not helpful to his own mission of empowering the federal government, for which his chosen means was to forge an alliance between the government and a new privileged financial elite.

… Piketty is not behaving like a passive chronicler of unavoidable destiny. He is acting as if he believes that the forces he describes in his book can be resisted. If we look at what Piketty does – rather than what he writes – it seems evident that he believes we can collectively make our own destiny, even if the circumstances are not what he, or we, would choose.

The wild card in all this is that humanity is now perched on the threshold of a transition from the Industrial Age to the Information Age.

The consequences of this transition socially, politically, and economically are likely to be least as profound as the transition from the Agricultural Age to the Industrial Age, but they cannot be foreseen with any accuracy because complexity and emergence.

While the claims of Doha death are, as Mark Twain might have said, premature, there is no doubt the development agenda has been undermined. Developing countries got very little in Nairobi, official press releases aside, and they are likely to get even less in a future characterised by Southern incoherence and Northern dominance.

TripleCrisisDon’t Buy the SpinBiraj Patnaik, Principal Adviser to the Commissioners of the Supreme Court in the Right to Food case, and Timothy A. Wise, researcher at Tufts University

Of course everybody associated with the Port is high-fiving meanwhile what about their fellow citizens who work in the domestic industries that might produce the same products that are in the containers?

Summary of the fault lines built into the structure of the EZ. The only practical way to reject austerity is either to change the rules, or for countries to exit the zone and return to issuing their own currencies.

So when a political party claims to be anti-austerity but then supports the nation remaining within the monetary union with all the pernicious and unworkable rules that go with that, then we know the political leaders are lying and trying to pretend to be progressive rather than neo-liberal (lite or otherwise).

The most disturbing NGO may, however, be the UN Interagency Framework Team for Preventive Action. The Framework Team is largely privately funded with George Soros as one of the primary sponsors. The NGO under UN cover is “coordinating UN, governmental and non-governmental initiatives.”

With Germany now the dominant economic and political force in Europe, bullying other nations to support pernicious policies in southern Europe, their latest plan demonstrates clearly that their conception of European integration bears no resemblance to a structure that might allow the common currency to function effectively in the interests of European citizens.The article essentially summarises a leaked document – “a letter sent at the end of November by the Ministry of Finance to the heads of the Finance and Budget Committee of the German Parliament”.…

MMT takeaway:

Modern Monetary Theory (MMT) tells us that once the fiscal capacity is aligned with the currency-issuing capacity then there is no need for they government to continue to issue debt. Simple accounting transactions between the central bank and the treasury can facilitate government spending without any recourse to issuing debt.

That is a defining feature of a currency-issuing government, which floats its exchange rate.

Most regular readers and those who understand MMT already know this, but it is a good summary of the correct versus the erroneous notion of banking operations.

Bill Mitchell – billy blogCentral bank propaganda from the USBill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

This paper investigates very long-run preindustrial economic development. New annual GDP per capita data for six European countries over the last seven hundred years paint a clearer picture of the history of European economic development. We confirm that sustained growth has been a recent phenomenon, but reject the argument that there was no long-run growth in living standards before the Industrial Revolution. Instead, the evidence demonstrates the existence of numerous periods of economic growth before the nineteenth century—periods of unsustained, but raising GDP per capita. We also show that many of the economies experienced substantial economic decline. Thus, rather than being stagnant, pre-nineteenth century European economies experienced a great deal of change. Finally, we offer some evidence that, from the nineteenth century, these economies increased the likelihood of being in a phase of economic growth and reduced the risk of being in a phase of economic decline.

Progress is not as linear as some imagine.

Journal of Economic Perspectives: Vol. 29 No. 4 (Fall 2015)Seven Centuries of European Economic Growth and DeclineRoger Fouquet, Grantham Research Institute on Climate Change and the Environment, London School of Economics and Political Science, and Stephen Broadberry, Oxford University

Brad DeLong apparently agrees with Piketty that rent is intrinsic to capitalism. Marx had held that rent is not only intrinsic to capitalism but also the driving force behind it in distributing the surplus in favor of non-producers through capitalistic distributional institutions.

Baker:

The bulk of this upward redistribution comes from the growth of rents in the economy in four major areas: patent and copyright protection, the financial sector, the pay of CEOs and other top executives, and protectionist measures that have boosted the pay of doctors and other highly educated professionals. The argument on rents is important because, if correct, it means that there is nothing intrinsic to capitalism that led to this rapid rise in inequality, as for example argued by Thomas Piketty.

Dan Kervick went on to point out in the comments that for Piketty this is rent extraction and it's endemic to capitalism.

Matt Rognlie argued that most of the differential was owing to housing. That would be land rent.

It's difficult to see how anything accrues to capital from production rather than from ownership and institutional arrangements privileging ownership. Historically, all ownership resulted from the commons as a result of exercise of power, either through raw force or the force of law. Since governance has always been class-based, institutional arrangements have been class-based, either through a ruling class governing by force, or by a republic chiefly representative of class interests.

Monday, December 28, 2015

The distribution of income in society is a function of two things: distributive institutions and everything else. By distributive institutions, I am referring mainly to the laws that pertain to the distribution of resources in a society. Distributive institutions include such things as bankruptcy law, corporate law, securities law, property law, contract law, tax law, benefits law, and so on. Put another way, distributive institutions are the distribution-specific subset of the "rules of the game" that structure economic activity in society.….

The fact that distributive institutions are not a suprahistorical constant should be an obvious point. But it's a point that is constantly missed, especially in the poverty realm where I spend most of my time. In the poverty realm, most of the respectable discussion is about how to change "everything else" so that it delivers lower poverty within our existing set of distributive institutions. Little attention is paid to the fact that the national income of the US is so high that even slight changes in our distributive institutions could bring sweeping anti-poverty gains. In fact, anti-poverty efforts that focus on the country's distributive institutions are almost absent from mainstream poverty discourse. Even poverty experts who know better often exclude distributive reform because it is "against American values" (which is to say too counterhegemonic to happen in the short term).

The inattention to distributive institutions in inequality analysis is a critical mistake. If you want to create and, more importantly for the present point, maintain an egalitarian society, you must be prepared to reform distributive institutions fairly regularly. This is because "everything else" in society is dynamic: technologies change, demographics change, ways of living and relating to one another change. Some changes will improve distributive fairness within the existing distributive institutions while others will threaten it. Where a change threatens distributive fairness, institutional reform must meet the threat.

For libertarian types that think altering distributive institutions is tantamount to violent theft, the prospect of repeatedly tinkering with them may be a bleak one. But for everyone else, this kind of tinkering should be welcomed as a great facilitator of personal freedom and dynamism.…

Anwar Shaikh is one of the few economists who had warned about cracks in the foundations of growth of the US economy and the world economy as a whole and that it will lead to a crisis in the 2000s. He has a new book titled Capitalism: Competition, Conflict, Crises. It will be published around February next year....

... In an interview to Ian Macfarlane, Wynne Godley says how much he learned about neoclassical economics from Anwar Shaikh. They then put up a paper titled An Important Inconsistency at the Heart of the Standard Macroeconomic Model. Wynne Godley considered it one of his most important papers.

Sunday, December 27, 2015

In this commentary, David Silbersweig, Chairman of the Department of Psychiatry and Co-Director of the Institute for the Neurosciences at Brigham and Women’s Hospital, and Stanley Cobb Professor of psychiatry and Academic Dean (Partners HealthCare) at Harvard Medical School, makes the case for the value of a liberal arts education — and a philosophy education in particular — in today’s multidisciplinary world.

David Silbersweig | Chairman of the Department of Psychiatry and Co-Director of the Institute for the Neurosciences at Brigham and Women’s Hospital in Boston. He also is the Stanley Cobb Professor of Psychiatry and Academic Dean (Partners HealthCare) at Harvard Medical School

To achieve that [efficiency], many of these app and Web-based platforms have set up the equivalent of a labor auction block - but it's an auction in which the lowest bids win. Freelancers and contractors bid against each other to win the job, and since the Internet is global, some of these labor brokerage websites put US workers into direct competition with workers in the Philippines, India and other places. The result is predictable: cheap, Third World labor undercuts developed-world wages. It's a race to the bottom, with many gig-preneurs complaining that, after the platform takes its cut and the workers subtract their expenses, sometimes they make less than minimum wage.

So companies like Uber, Postmates, Upwork and TaskRabbit claim that they are "liberating workers" to become "independent," "in business for themselves" and "the CEOs of their own businesses." In reality, the workers are vulnerable contractors, with no safety net benefits or job security, and they have little choice but to take ever-smaller jobs ("gigs" and "micro-gigs") and low wages while the company profits in what I call the "share the crumbs" economy.…

What follows is an exploration of 10 factors that will probably determine the White House winner next year. Some of these — many of them, in fact — suggest that the GOP should be seen as a narrow favorite. But a few factors, combined with the live possibility that the next Republican nominee will make Mitt Romney look like Ronald Reagan, indicate to us that, as we turn the page from 2015 to 2016, that the 2016 general election is still a coin flip.…

One of the seemingly permanent contributions of Europe to the manner of organizing international society was to create a strong consensus in support of the idea that only a territorially delimited sovereign state is entitled to the full privileges of membership. The United Nations, the institutional embodiment of international society, recognizes this principle by limiting membership in the Organization to ‘states.’ Of course, there is an enormous variation in the size, population, military capabilities, resource endowments, and de facto autonomy among states. At one extreme are gigantic states such as China and India with populations of over 1 billion, while at the other are such tiny countries such as Liechtenstein or Vanuatu that mostly rely on diplomacy and police rather than gunpowder and armies for security. All four of these political entities have the same single vote when it comes to action in the General Assembly or as participants at global conferences such at the recently concluded Paris Summit on climate change, although the geopolitics is supreme in the Security Council and the corridors outside the meeting rooms.

From the point of view of international law and organizational theory, we continue to live in a state-centric world order early in the 21st century. At the same time, the juridical notion of the equality of states that is the foundation of diplomatic protocol should not lead us astray. The shaping of world order remains mainly the work of the heavyweight states that act on the basis of geopolitical calculations with respect for international law and morality displayed only as convenient. Yet the political monoculture of territorial states remains formally the exclusive foundation of world order, but its political reality is being challenged in various settings, and nowhere more so than in the Middle East.…

Is the Westphalian model breaking down?

The Westphalian model is uniquely European and it was imposed by European colonialists on the rest of the world. Is it suitable basis for a world order now, or is it an extension of European imperialism and colonialism?

While ISIS is the threat that keeps Washington policymakers up at night, it’s the rise of China that has international relations theorists in a panic. Graham Allison argues persuasively that China’s rise portends a classic Thucydides Trap. His research shows that in twelve of the last sixteen cases over the past five hundred years, when a rising power challenged an established one, the result was war. John Mearsheimer, somewhat more bluntly, warns that “China cannot rise peacefully.” It’s an impending great power clash that makes the threat from ISIS look like child’s play.

But China threatens the United States only insofar as America insists on being the dominant power in China’s backyard, a policy that actually contributes very little to U.S. security. If we abandon our strategy of primacy, the risk of a clash will shrink away. If we try to contain China’s rise, on the other hand, these predictions of doom may prove right.…

The cost of trying to maintain a "unipolar" (read imperialistic) world order.

Primacy could conceivably be justified if the United States derived commensurate benefits. That does not appear to be the case. As Robert Jervis has written, “the pursuit of primacy was what great power politics was all about in the past,” but in a world of nuclear weapons, with “low security threats and great common interests among the developed countries,” the game is not “worth the candle.” Charles Glaser similarly argues, “Unipolarity is much overrated.” It is not necessary to protect core national interests and in fact causes the U.S. to “lose track of how secure it is and consequently pursue policies that are designed to increase its security but turn out to be too costly and/or to have a high probability of backfiring.” Nor does U.S. dominance reap much in the way of tangible economic rewards. Daniel Drezner contends, “The economic benefits from military predominance alone seem, at a minimum, to have been exaggerated. . . . There is little evidence that military primacy yields appreciable geoeconomic gains” and therefore “an overreliance on military preponderance is badly misguided.”The struggle for primacy in East Asia is not fundamentally one for security or tangible economic benefits. What is at stake is largely status and prestige. As the scholar William Wohlforth explains, hegemonic power transitions throughout history actually see the rising power seeking “recognition and standing rather than specific alterations in the existing rules and practices that constituted the order of the day.” In Thucydides’ account of the Peloponnesian War, for example, “the rise of Athens posed unacceptable threats not to the security or welfare of Sparta but rather to its identity as leader of the Greek world.” Similarly, the power transition between a rising Germany and a dominant Great Britain in the lead up to World War I was characterized by an “absence of tangible conflicts of interests.” U.S. paranoia over the rise of China is less about protecting significant strategic and economic returns, which are marginal if not actually negative, and more about a threat to its status, prestige and reputation as the world’s sole superpower. In no way is that a just cause for war.…

Lincoln’s decision to resist Southern secession and fight a war to maintain the American Union was motivated primarily by his belief that the nation was founded on the idea that this country “proposed to give all a chance” and allow “the weak to grow stronger.” The toxic combination of secession together with an unending commitment to unpaid human bondage by a new and separate Confederate nation, he calculated, would be fatal to the American Dream. It posed a direct threat to a self-sustaining middle-class society and to the promise of America leading the way to spreading the idea of opportunity and upward mobility throughout the world.

“I hold the value of life is to improve one’s condition,” Lincoln declared just three weeks before assuming the presidency, reiterating a lifetime of similarly expressed commitment to what historian Gabor Boritt brilliantly calls the uniquely American “right to rise.” Seven slaveholding Southern states had already declared by their independence the converse: the right to establish a nation of their own based on the denial of opportunity. Lincoln believed that the American nation based on the credo of opportunity for all was worth fighting for. “Whatever is calculated to advance the condition of the honest, struggling laboring man, so far as my judgment will enable me to judge of a correct thing, I am for that thing,” he said in 1861. In the face of unimaginable casualties and devastation, he remained for “that thing” for the rest of his life.

The origin, depth, and durability of Lincoln’s commitment cry out for new exploration and interpretation, particularly now, as the ability to rise is being challenged in the United States by economic, social, and political conditions producing ever-increasing inequality.…

… Lincoln was unwavering in his commitment to preserve the American Dream of economic opportunity for future generations, a dream he lived by escaping the poverty of his childhood and one he advocated throughout his political life. It was this commitment that lay behind his determination to ensure that a government dedicated to providing economic opportunity for its citizens “shall not perish from the earth.” Lincoln largely fought the Civil War over this principle, establishing a role for government in securing and guaranteeing economic opportunity for its citizens, a guarantee that has remained at the center of political debate and discord ever since, seldom so acrimoniously as today….

More than is often realized, the Civil War was fought not over the morality of slavery or the abstract sanctity of the American Union, but over what kind of economy the nation should have….

The latest changes to China's forex market management will increase yuan volatility and boost trading volumes, according to a leading Chinese investment firm.

From Jan. 4, closing time for China's interbank foreign exchange market will be extended from 4:30 p.m. to 11:30 p.m. Beijing time, the People's Bank of China announced last week, adding foreign institutions' access to the market will also be expanded.

The yuan exchange rate may become slightly more volatile, China International Capital Corp. (CICC) said in an analysis note.

By overlapping the trading hours with those of London, the spread between onshore and offshore yuan exchange rates will be narrowed, bringing down the technical difficulty for RMB users to hedge forex risk, it said.

After the changes, China's forex market is set to grow, especially in terms of trading volume, which represents a major opportunity for financial institutions with forex expertise and cross-border capacity, the CICC predicted.

My blog in the next week or so will be possibly rather holiday-like given the time of the year and the fact that I have rather a lot of travel and related commitments to fulfill over that period. So I will be pacing myself to fit it all in. Today, a brief comment on an article that appeared in the December 2015 issue of The Region, a publication of the Federal Reserve Bank of Minneapolis – Should We Worry About Excess Reserves (December 17, 2015). It is that one of those articles that suggests the author hasn’t really been able to see beyond his intermediate macroeconomics textbook and understand what is really been going on over the last several years. It describes a monetary system that doesn’t exist but which most people think does. It is what we now refer to as anti-knowledge, the most dangerous kind.

Bill Mitchell – billy blogCentral bank propaganda from the USBill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

In last week’s review of the Russian military intervention in Syria I wrote that Kerry had lost every single negotiation he ever had with the Russians and that he had a record of agreeing to A only to come back to the US and then declare non-A. This time again, the Americans did not change their modus operandi, except that it was Obama himself who declared, yet again, that Assad must go, resulting in some commentators speaking of a “White House Schizophrenia”. Others, however, noted that this could be simply a case of face saving denials. Personally, I think that both of these explanations are correct.

There is no doubt that Obama is an exceptionally weak, and even clueless, President. The man has proven to have no vision, no understanding of international relations, his culture is minimal while his arrogance appears to be infinite – he is all about form over substance. This is the ideal mix to win a Presidential election in the USA, but once in the White House this is also a recipe for disaster. When such a non-entity is placed at the top of the Executive branch of government, the different part of government do not get a clear message of what the policy is and, as a result, they each begin doing their own thing without worrying too much about what the POTUS has to say.

The recent article by Sy Hersh “Military to Military” is a good illustration of that phenomenon. Being weak and lacking vision (or even understanding) Obama’s main concern is conceal his limitations and he therefore falls back on the oldest of political tricks: he tells his audience whatever it wants to hear. Exactly the sames goes for Kerry too. Both of these man will say one thing to the Russian rulers or during an interview with a Russian journalist, and the exact opposite to an American reporter. That kind of “schizophrenia” is perfectly normal, especially in the USA.

To use the expression coined by Chris Hedges, the USA is an “Empire of Illusion”. The US society has an apparently infinite tolerance for the fake as long as the fake looks vaguely similar to the real thing. This is true on all levels, ranging from the food Americans eat, to the way they entertain themselves, to the politicians they elect and to the putative invincibility of the armed forces their taxes pay for.

It is all one gigantic lie, but who cares as long as it is a fun, emotionally reassuring lie.

Kenneth Roth Verified account @KenRothKilling Zahran Alloush is part of Assad strategy of trying to reduce choice to him or ISIS.

So, according to Kenneth Roth, Zahran Alloush who lauded Osama bin Laden, shelled civilians in Damascus and put Alawite women into cages as human shields, was a potentially valid "choice" for the Syrian people?

Zahran Alloush was the Western choice to replace Bashir al-Assad. He was represented in the media as a "moderate rebel." His killing was mourned and denounced in the Western media as well as Qatari-owned al Jazeera English as a setback for a solution in Syria.

Alloush was educated in Saudi Arabia and was an Islamist in the Wahhabi/Salafi/Takfiri mode. His gruesome record shows that he was anything but moderate.

Alloush

If Alloush had taken over Syria in place of Assad and in preference to ISIS or if he was given even taken a major role as planned, a bloodbath would have ensued leaving only Sunni Islamists in control of the state apparatus.

While it is fortunate that he is no longer in the picture from the political perspective, he left three wives and ten children without husband and father. There is no joy in war.

In an audio message (published in the link below in the Lebanese daily Assafir on the 26th of December 2015), ISIS/ISIL/IS Chief, “Caliph” Abou Bakr Al-Baghdadi gives a rather lengthy 24 minute speech. Half of the message is addressed to Muslims, all Muslims, whilst the other half is addressed to the world; especially the nations that have taken upon themselves to fight the Islamic State.

The approach is not systemic and jumps from one “half” to the other, but with a bottom-line call for all Muslims to band together in order to fight what he perceives as the enemies of Islam.

“The world has united to fight Islam”, he argues, and this was to be expected. Either way, Muslims will be the victors, because they will either be martyred in battle and get elevated to heaven, or win the battle on the ground.

And who are the enemies of Islam in his view? All nations that are fighting the Islamic State, including Saudi Arabia that has recently formed a military alliance against terrorism. Al Baghdadi says that the proposed Saudi coalition is only intended to fight Islam and the Islamic State. If its objectives were to uphold Islam, it would be fighting in Syria alongside the Islamic State and protecting the defenseless Muslims in Syria and in Palestine.

On the mention of Palestine, he addresses Jews and says that they have neither been forgotten nor forgiven. They will soon find themselves surrounded by the Islamic State and they will have nowhere to run and hide.

He calls for Saudi youth to rise against their heretic rulers, and for all Muslims to join him and take up arms in the battle that they knew was one day coming.

He makes direct mention of America, Europe and Russia and promises them retaliation…

There are always some international economic issues, especially with Europe, China and other areas of the world struggling. However, my focus is on the US economy, with an emphasis on housing.Here are my ten questions for 2016. I'll follow up with some thoughts on each of these questions.

Note that first four questions are about growth, employment and unemployment rate, and inflation, in that order.

Saturday, December 26, 2015

Dwight B. Billings, Distinguished Professor of Arts and Sciences at the University of Kentucky and former President of the Appalachian Studies Association, published the following letter to the editor in the Lexington Herald-Leader in the response to the university’s recent decision to accept Koch brothers’ money to establish the John H. Schnatter Institute for the Study of Free Enterprise:

David Stockman joins Paul Craig Roberts as a premier critic of US foreign and military policy.

Why is there no peace on Earth? Follow the money and politics (military-industrial-governmental complex).

Good historical summary of why there is no peace and won't be until the Machine is dismantled.

On this analysis Stockman's perennial complaint about "unfunded social welfare entitlements pales against the rationale for defunding military adventurism and the neo-imperialism on which it is based.

The current Ukrainian policy farce emanating from Washington is not only a reminder that the military-industrial-beltway complex is still alive and well, but also demonstrates why the forces of crony capitalism and money politics which sustain it are so lamentable. The fact is, the modern Warfare State has been the incubator of American imperialism since the Cold War, and is now proving itself utterly invulnerable to fiscal containment, even in the face of a $19 trillion national debt.

So 101 years after the Christmas truces along the Western Front there is still no peace on earth. And the long suffering American taxpayers, who foot the massive bills generated by the War Party’s demented and destructive policies, have no clue that Imperial Washington is the principal reason.

These concluding paragraphs of the long article are the only point at which Stockman introduces his erroneous monetary and fiscal analysis, but it is the logical conclusion of his primarily historical exposition. Hopefully, he will refocus on the the military extravagance instead of his misdirected attack on the welfare state. But it is not likely.

Friday, December 25, 2015

That bias is the theme of Jeremy Grantham's new quarterly message to GMO's clients.…To illustrate how this bias pervades society, Grantham identified 12 ways the US is thought to be a global leader. And in his charting, he reveals how the facts tell a different, more depressing story."It is my attempt to bring home how extreme is our preference for good news over accurate news," he said.

We grabbed his charts to give you a quick summary of what he's talking about.…

Six years into Greece's economic crisis and following successive "bailouts," there still seems to be no light at the end of the tunnel. Greece's economy continues to shrink and unemployment remains at record high levels while the Syriza-led government coalition has reneged on its promises of radical change and ending austerity. The troika, in turn, continues to insist that strict austerity measures, including budget cuts and mass privatizations, be enforced in Greece.

In this interview, economist Warren Mosler, a leading figure in the field of modern monetary theory and the cofounder of the Center for Full Employment and Price Stability at the University of Missouri-Kansas City, discusses money, debt and the role of the European Union's deficit limits in perpetuating the crisis, and shares the proposals he believes could help lead Greece out of its crisis.

I suppose this shows the limits of democracy when information, knowledge, and ultimately power are unequally distributed.…

This obscure theory validates, with its authority, a big economic mistake that sounds like common sense but is actually snake oil — the notion that the federal government budget is like a household budget. Actually, it isn’t. Your household doesn’t collect taxes. It doesn’t print money. It works very differently, yet the nonsense that it should behave exactly like a household budget gets repeated by politicians and policymakers who really just want to squeeze ordinary people.…

Thanks to the [CAB] estimate, the governments of Italy or Spain, for example, are supposed to force the economy toward some ideal economic condition, the definition of which is obviously quite controversial and has so far rewarded those countries that have implemented labor market deregulation, cut pensions, and even changed the way elections happen. Again, it’s a control mechanism.

In the U.S. this scenario plays out, too, although less strictly. Talk about the budget often relies on the same shifty and politically-shaded statistical tools to support one argument or the other. Usually we hear arguments that suggest we have to cut social programs and workers’ rights and benefits or face economic doom. Tune in to the presidential debates and you’ll hear this played out — and it isn’t strictly limited to one party.…

When children don’t get good educations, the production of knowledge falls into private control. Power gets consolidated. The official theoretical frameworks that benefit the most powerful get locked in.

In the economic field, we need to engage different points of view and keep challenging dominant narratives and frameworks.…

Edmund Burke, one of the great statesmen and philosophers of the 18th century, is the founder of modern conservatism. Or so it is commonly held: authorities, from Corey Robin on the left to Niall Ferguson on the right, agree that conservative ideology can be traced to this original source. The view has in fact been commonplace in the United States since the 1950s and has steadily been gaining currency across the globe. Admirers of Burke’s ‘traditionalism’ can be found in numerous countries, as different as the Netherlands and Japan. Yet there is something deeply misleading about this view of conservatism’s origins. Burke was a reforming Whig of the 18th-century British parliament whose ideas were not developed with modern politics in mind.

Even if we imagine Burke as our contemporary, his commitments are not in any way compatible with conservatism. For example, he was a defender of colonial rights against the British Empire during the period of the American Revolution. In lending his support to American defiance, he opposed the reigning tenets of British imperial policy and took a stand against successive ministries at Westminster. His defence of colonial rights included support for insurrection, for violent resistance against established authority. It is hard to reconcile this endorsement of revolt with what are usually regarded as conservative ideals.…

Conservatives have either ignored Burke’s support for colonial rebellion, or maintained that his career was split between two phases: an early period of support for the ‘liberal’ cause of America and a later ‘conservative’ reaction to the Revolution in France. Burke certainly changed his opinions over the course of his career, but these shifts cannot be captured by presuming a contradiction between his support for American resistance and his aversion to the revolution in France. Representations of Burke as a renegade from early idealism are based on the dogmatic assumption that the American and French revolutions were fundamentally ‘the same’. Yet for Burke these two events were absolutely different, and in fact he had good reasons for insisting on their difference.…

For anyone concerned to focus on what matters in politics, they would be better off evaluating the substance of particular issues than reaching to enlist canonical thinkers in contemporary causes by branding them with complacent and misleading categories.

Burke’s view was that Westminster confused its authority with its power. In being affronted by the audacity of the Americans, the British ministry began to fear for its own dignity. Instead of bolstering its standing by public acts of goodwill, the government resorted to shows of strength. As a result, each time Westminster tried to demonstrate its potency, it compromised its standing in the eyes of the colonists. The underlying irony was that the more the metropole opted to display its might, the more it undermined its moral authority. Imperial militancy thus led to imperial impotence.

Wednesday, December 23, 2015

In recent parts of the series, we have been considering the temporal single-system interpretation (TSSI) of Marx’s theory of value. We have considered how, in the TSSI, the values of constant capital and variable capital depend upon the prices that prevail when inputs and labor power enter production. In contrast, the values and prices of output are only determined once production is complete and the commodities are ready for sale on the market. This conception of value and price determination requires a more general formula for the MELT (or ‘monetary expression of labor time’). The basic meaning of the MELT remains the same. It is still the amount of monetary value created by an hour of socially necessary labor or, conversely, the amount of labor, represented in commodities, that a unit of the currency can command. But, according to the TSSI, the method for calculating the MELT is different in a temporal setting, under most circumstances.

Tuesday, December 22, 2015

One of the few forecasters to predict both the start and peak of China’s equity boom, is now warning the nation will be buffeted by the same forces that caused financial crises around the world over the past four decades.Hao Hong, chief China strategist at Bocom International Holdings Co. in Hong Kong, says a shortage of dollars was the common feature in the oil rout in the 1970s, Latin American debt turmoil in the 1980s, the Asian currencies collapse in 1997 and the global crisis in 2008. Next year will see Federal Reserve interest-rate increases, an improving U.S. current-account balance and a stronger greenback, putting strains on the most-leveraged parts of the world’s second-largest economy, he says.…

What is most interesting in the post is not the politics but the notion of (ir)rationality put forward.

The normal view of human beings is that we are mostly rational, but sometimes we get a bit emotional or crazy. My so-called Moist Robot Hypothesis on reality says the reverse, that we are irrational nearly all the time and that we rationalize our decisions after the fact.

This is about the causality and anti-causality accounts of reason.

The causal account is that humans are "rational" in that reason is the cause of action. People act for a reason, that is, purposes serve as criteria for differentiating among means with choice being about the optimal means for securing the purpose. Reason guides the process from the beginning.

The anti-causal account is that in much of decision-making, purposes are largely irrational, either value-based or emotion-based. Reason is brought in subsequently to justify choices made before reason becomes operative. Reason is not the cause of most action. Rather, it is the interplay of morality versus animal sprits where the stronger force wins. Much if not most of this occurs at the pre-conscious level of brain functioning based on channel strength. Human beings as rational calculators weighing utility in relation to opportunity cost is a myth largely perpetrated by economists. Psychologists know better.

The social democratic economy model the major North Atlantic economies followed as recently as a single generation ago had five salient features.

First, that labor was important relative to ownership of wealth as a source of income.

Next, enterprise and savings were important relative to inheritance as a source of accumulated wealth.

Opportunity, while constrained by race and gender, was not that constrained by class—there was upward mobility.

Economic growth—both numbers of workers and the productivity of the average worker—was relatively rapid, with each generation clearly larger and more productive than its predecessor.

And finally, politics were relatively democratic, in that while the rich spoke with a louder voice, their concerns did not drown out the economic interests of others.

And Thomas Piketty’s central claim is that all five of these once-salient features of our social democracy are vanishing. We are, he believes, on a long-run historical trajectory to return us to a situation more like the nineteenth century, in which ownership of capital is more important relative to labor as a source of income; inheritance dominates enterprise and savings as a source of wealth; opportunity is tightly constrained by class of birth; economic growth is slow (both because of declining technological invention andbirth rates on the one hand, and because established wealth, which is hostile to the creative destruction that drives economic growth, possesses a bigger voice in shaping the political economy), and politics is dominated by plutocrats.

Capital in the Twenty-First Century has struck a chord—hence its 2.2 million copies.

And it has excited a fierce debate, with more and more people finding it worth arguing about both for the reasons that it struck a chord and because of the fact that it has struck a chord.…

For all the talk about austerity and running out of munnie, the US Congress goes all in on fiscal expansion.

It is quite clear that expansionary fiscal policy is not about the size of federal government: if you want it to shrink, you can go for tax cuts, and if you want it to increase you go for increased spending. However, there is no reason to not use expansionary fiscal policy because you believe in one or the other proposition regarding the size of the government. The US has a valuable lessons to teach to the austerity crowd in Europe:

Monday, December 21, 2015

President Obama has infuriated Official Washington’s neocons by accepting the Russian stance that the Syrian people should select their own future leaders through free elections, rather than the neocon insistence on a foreign-imposed “regime change,” reports Robert Parry.…

Kerry “now agrees with Mr. Putin that the country’s future leadership must be left to Syrians to work out,” the Post’s outraged editors wrote. Yes, you read that correctly.

A study released at the beginning of December by the Institute for Policy Studies (IPS) reported that America’s 20 wealthiest individuals own more wealth than roughly half the American population combined—152 million people. The startling level of economic inequality in the United States is also highlighted by Forbes, which recently observed that the richest 400 Americans possess more wealth than 62 percent of the American public—192 million people. Furthermore, these studies apparently underestimate the concentration of wealth in the United States, for the use of offshore tax havens and legal trusts conceals trillions of dollars that the richest Americans have amassed for themselves and their families…

In the 1970s, America’s wealthiest 0.1 percent—the richest one-thousandth of the population—owned 7 percent of U.S. household wealth. Today, that figure has risen to 20 percent—about as much wealth as is possessed, in total, by the bottom 90 percent of Americans.

Although the 20 richest Americans, who possess more wealth than about half the American population combined, include some founders of corporations, they are outnumbered by the heirs of families with vast fortunes. The latter individuals include Charles and David Koch (the scions of a wealthy founder of the John Birch Society, with $82 billion between them) and four members of Wal-Mart’s Walton clan (with $127.6 billion among them).

All right, you might say; but does this economic inequality really matter? Well, it certainly matters to those Americans whose economic opportunities have been stunted to facilitate this accumulation and hoarding of vast wealth. Furthermore, as the authors of the IPS study note: “Extreme inequalities of income, wealth and opportunity undermine democracy, social cohesion, economic stability, social mobility, and many other important aspects of our personal and public lives.” In addition, “extreme inequality corrodes our democratic system and public trust. It leads to a breakdown in civic cohesion and social solidarity, which in turn leads to worsened health outcomes. Inequality undercuts social mobility—and has disastrous effects on the economy.”

Inequality of income and wealth is another of the paradoxes of liberalism.

The latest Seymour Hersh piece alleges that the Joint Chiefs of Staff (JCS) under General Dempsey undermined the official White House policy on Syria. Their impetus to do so came after a Defense Intelligence Agency analysis found in 2012 that there were hardly any "moderate rebels" in Syria but only Islamists fighting against the Syrian state. The CIA was at least since early 2012 delivering weapons from Libya to Turkey as well as through other routes. The U.S. Ambassador to Libya Chris Stevens was killed on September 11 2012 in Benghazi over some issues with the weapon transfers. Once in Turkey those weapons, as well as plane loads of others purchased by Qatar and Saudi Arabia, were given to "moderate rebels" who took them into Syria. There they sold off at least part of every weapon and ammunition haul to the Islamists terror gangs which were and are financed by the Wahhabi Gulf states. A new BBCRadio4 report by Peter Oborne explains in detail how that scheorks.

The JCS under Dempsey was quite disturbed that weapons transferred by the CIA were going to exactly those people they had fought in Iraq and Afghanistan just a few years ago. They decided, according to Hersh's source, to undermine the White House's and CIA's regime-change program.…

In research and debates about economic inequality in the United States, there’s been a resurgence this year in explanations for rising inequality that emphasize market power and market imperfections. In a recent piece for the New York Review of Books, Paul Krugman details how increasing market power seems to be a more attractive story of how inequality became so large in the United States. A paper that Krugman cites—by Jason Furman, Chairman of the Council of Economic Advisers, and Peter Orszag of Citigroup—emphasizes the role of “rents” in contributing to inequality and suggests increasing market power could be the reason for this trend. But an interesting new paper from Dean Baker, economist and co-director of the Center for Economic and Policy Research, proposes a very different reason for why those rents came about.…

Containing the scourge of Islamist terror will be impossible without containing the ideology that drives it: Wahhabism, a messianic, jihad-extolling form of Sunni fundamentalism whose international expansion has been bankrolled by oil-rich sheikhdoms, especially Saudi Arabia. That is why the newly announced Saudi-led anti-terror coalition, the Islamic Military Alliance to Fight Terrorism, should be viewed with profound skepticism.…

While this is well known, it's interesting that it is appearing at Project Syndicate, which is an organ of the System. Formerly, it was a persona non grata like Noam Chomsky saying this and getting no exposure.

Project SyndicateSaudi Arabia’s Phony War on Terror
Brahma Chellaney | Professor of Strategic Studies at the New Delhi-based Center for Policy Research and Fellow at the Robert Bosch Academy in Berlin